FHA – Oh, this makes me feel a LOT better…..
by Tom on October 9, 2009
in Market Musings, banks
I don’t think so…….
Let me elaborate:
- FHA is supposed to keep a “capital reserve account” (think rainy day fund) of at least 2% of their outstanding loans.
- They have fallen below that.
- Their delinquency rates on their loan portfolio are skyrocketing. The last numbers that I saw had them approximately 100% higher than they were 2 years ago and still climbing.
- FHA is in deep trouble. They have become the subprime lender of choice and everyone who is in “the business” knows that.
So, the head of FHA appears before a Congressional committee and what does he say?
- Does he admit, “Yep, we’re in trouble. We expect mounting losses, huge deficits and the need for Ben and Timmy to bail us out?”
- Not a chance Vance, he says, “Everything is fine, we’ve got more cash than we ever have.”
Let’s look at a couple of numbers a minute:
- 4 years ago, FHA had approximately 2% of the market.
- The last statistics on FHA that I’ve seen have shown the current market share for FHA to be in the neighborhood of around 23% (thanks to Calculated Risk for the statistics)
Okay, look at the numbers – they have gone from a 2% market share to a 23% market share.
OF COURSE THEY HAVE MORE CASH THAN THEY HAVE EVER HAD!
But that doesn’t mean that they have enough cash and it doesn’t mean that they are in good shape. It’s merely a matter of size.
We’re already seeing FHA scale back but we’ll be seeing even more of it. And yes, I happen to agree more with what the former credit officer for Fannie Mae said in written testimony prepared for the same committee:
Edward Pinto, the former chief credit officer at Fannie Mae projected a far worse scenario for FHA. In his written testimony for the committee, Pinto said FHA “appears destined for a taxpayer bailout in the next 24-36 months.”Watch this story folks, it’s not going to be pleasant as it unfolds…..
Tom Vanderwell
FHA Won’t Need a Bailout, Says David Stevens : HousingWire || financial news for the mortgage market
On the heels of the disclosure that the Federal Housing Administration’s (FHA) mutual mortgage insurance (MMI) fund may dip below the Congressional-mandated 2% capital reserve threshold, some are warning the FHA may need a taxpayer bailout to stay afloat.But FHA commissioner David Stevens, appearing before a House Financial Services subcommittee, discounted those claims and said the fund can return to required levels without intervention within three years.
During a Subcommittee on Housing and Community Opportunity hearing Thursday, Stevens said the independent, non-governmental actuarial review of the MMI fund is based on conservative estimates for the future of the housing market’s recovery. While the capital reserve account (the account that’s required to stay at or above 2%) may dip below the required level, he indicated the total FHA reserve is projected to be higher than its ever been.
Technorati Tags: FHA Bailout
“…Not a chance Vance.” I like the sound of that!